Government Contracts Blog : Government Contracts Lawyer & Attorney : Sheppard Mullin Law Firm : Bids, Licenses, Awards, Conflict of Interest.

With its recent decision in Allison Engine Co. v. U.S. ex rel. Sanders, the Supreme Court has resolved the conflict among the circuits over whether plaintiffs must show "presentment" of a false claim to establish liability under two False Claims Act (FCA) provisions, 31 USC §§3729(a)(2) and (a)(3).  Finding no requirement that a claim be directly presented to the government, the Court nevertheless limited the scope of FCA liability by requiring actions brought under §3729(a)(2) to "prove that the defendant intended that the false record or statement be material to the Government's decision to pay or approve the false claim."  Similarly, an action based on an alleged conspiracy under §3729(a)(3) "must show that the conspirators agreed to make use of the false record or statement to achieve this end."  While settling a prominent issue of FCA jurisprudence, the Court's opinion raises other issues of particular relevance to government contractors at the subcontract level.  These issues are addressed following a summary of the Allison decision.

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The regulations prohibiting the Department of Defense from purchasing products containing foreign specialty metals may be changing. Again.

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It is well-recognized that, with limited exceptions, neither the GAO nor the Court of Federal Claims has been willing, historically, to assume jurisdiction over IDIQ task or delivery order protests.  Recently, there has been some loosening of that bar, in the form of Public Law No. 110-181, § 843, which grants the GAO exclusive jurisdiction for a period of three years over protests against task or delivery order awards valued at more than $10 million.  Even with that legislative development, however, there are many task orders and/or delivery orders that will jurisdictionally escape review via the protest process.

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Introduction by John W. Chierichella

In the halcyon days of yesteryear, IDIQ contracts occupied a quaint niche in Government contracting in which small quantities of idiosyncratic products or services could be acquired without much procurement ado. No more. Sparked by serial iterations of legislative procurement reform, IDIQ contracts have become bigger business than anyone ever anticipated. As the use of this once overlooked procurement vehicle has exploded across the federal landscape, so too has the potential for -- and the reality of -- disputes relating to the award, performance and termination of IDIQ contracts. Recently, three of our Government Contracts lawyers -- Jonathan Aronie, Marko Kipa, and Keith Szeliga -- published an article in the Public Contracts Law Journal surveying the state of the law in IDIQ-land. With permission of the Journal, their article is reproduced in full in this issue of our blog.

Click here to view a PDF copy of the document.

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On April 30, 2008, the National Defense Industrial Association -- a trade association whose membership includes 1300 defense contractors, many of whom are small businesses -- filed an amicus curiae brief in support of a petition for a writ of certiorari at the U.S. Supreme Court. The amicus brief encouraged the Supreme Court to reverse a September 2007 decision by the U.S. Court of Appeals for the Federal Circuit vacating a $436 million verdict in favor of a victim thrift in a Winstar-related case because the thrift's agreement with the government was tainted from the inception by fraud and misrepresentation. Long Island Savings Bank, FSB v. United States, 503 F.3d 1234. The Federal Circuit held that any agreement with the federal government that is tainted by fraud or misrepresentation or conflict of interest at the outset -- even when the wrongful acts were committed by a rogue employee engaged in illegal acts of self-dealing -- automatically renders the agreement void in its entirety and absolves the government from any responsibility to perform (even though the contractor may have already fully performed under the agreement, and the government may have already received the benefit of the bargain).

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As discussed in a prior posting on this blog, the U.S. Department of the Treasury published on April 21, 2008 proposed rules designed to strengthen the process by which the Committee on Foreign Investment in the United States ("CFIUS") reviews and approves certain business transactions involving foreign investment. The proposed rules were issued under the Foreign Investment and National Security Act of 2007, Pub. L. No. 110-49 (“FINSA”), which requires a more intense CFIUS process that allows the government more discretion in investigating and altering business transactions that may impact national security.  The U.S. Department of the Treasury invited comments on the proposed rules through June 9, 2008.  Now that the comment period is over, we thought it might be worthwhile to see what types of comments were received.  Not surprisingly, it is a mixed bag.

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Questions to ask When Evaluating the Agent's Contract

• Is the agent's territory well defined?
• Are products covered well defined?
• Are fees contingent on "contract award" or "sales"?
  • Does "contract award" include funding and orders?
  • Are "sales" defined to include receipt of payment?
• Will payment be made:
  • In the name of the business entity with which you are contracting?
  • In the country in which the services are being provided?
  • To the established business address of the agent set forth in the contract?
  • Directly into an in-country account in the agent's business name?
• Is there a:
  • Disclaimer of any undisclosed principals?
  • Prohibition against fee splitting?
  • Representation with respect to FCPA compliance?
  • Warranty of compliance with all U.S. laws and regulations?
  • Requirement to file periodic reports of activities?
  • Requirement to report on contacts made on your behalf?
• Do the fees appear reasonable:
  • Comparable to similar industry arrangements?
  • In comparison to activities and risks
  • Limited to amounts permitted under, or satisfy the conditions of, FMS or FMF agreements?

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